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2015 (2) TMI 576 - AT - Income TaxReopening of assessment - disallowance to be made u/s.14A - Held that - Unable to find any tangible material in the reasons recorded by the AO.He has at the time of original assessment already deliberated upon the issue of disallowance to be made u/s.14A of the Act.Therefore,it can safely be held that in the case under consideration there was no tangible material.In these circumstances,we are of the opinion that the reassessment proceedings were initiated due to change of opinion of the AO and not because there was tangible material.Courts are of the view that if a notices is issued u/s.148 because of change of opinion,then same is to considered bad in law and has to be quashed.Considering the facts and circumstances of the case,we are reversing the order of the FAA and decide the effective ground of appeal(GOA-1)in favour of the assessee.
Issues:
1. Validity of reassessment proceedings under section 147 based on change of opinion. 2. Disallowance made under section 14A of the Income-Tax Act, 1961. Issue 1: Validity of reassessment proceedings under section 147 based on change of opinion: The Appellate Tribunal considered the grounds of appeal raised by the Assessee challenging the order of the CIT(A). The Assessee contended that the reassessment proceedings initiated under section 147 were based on a mere change of opinion on the same set of facts. The Tribunal admitted an additional ground of appeal raised by the Assessee, stating it was a pure legal issue not requiring factual investigation. The Tribunal analyzed the reasons recorded by the Assessing Officer for reopening the assessment and found that there was no tangible material to justify disturbing a completed assessment. Citing relevant case law, the Tribunal emphasized that the primary requirement for reopening an assessment is a reason to believe that income has escaped assessment based on tangible material, not inference or opinion. The Tribunal concluded that the reassessment proceedings were initiated due to a change of opinion by the Assessing Officer, rendering them bad in law. Consequently, the Tribunal reversed the order of the CIT(A) in favor of the Assessee. Issue 2: Disallowance made under section 14A of the Income-Tax Act, 1961: The case involved an original assessment completed under section 143(3) of the Act, where the Assessing Officer noticed that the Assessee had dividend receipts claimed exempt under section 10(34) of the Act but had not quantified any expenditure attributed to the exempted income for disallowance under section 14A. The Assessing Officer issued a notice under section 148, contending that income had escaped assessment due to the failure to disallow expenditure related to exempt income. During the appellate proceedings, the Assessee argued against the applicability of Rule 8D for the relevant assessment year and presented various contentions regarding the disallowance. The First Appellate Authority (FAA) upheld a partial disallowance under section 14A, considering the judgment of the jurisdictional High Court and the lack of evidence provided by the Assessee. The Assessee further contended before the Tribunal that the reassessment proceedings were unjustified and relied on precedents where similar additions were deleted. The Tribunal considered the arguments and found that the disallowance made by the Assessing Officer was not justified, ultimately restricting the disallowance to a lower amount than originally calculated. The Tribunal examined the facts and circumstances, concluding that the disallowance made by the Assessing Officer was excessive, and decided the ground of appeal in favor of the Assessee. In conclusion, the Appellate Tribunal in Mumbai addressed the issues of the validity of reassessment proceedings under section 147 and the disallowance made under section 14A of the Income-Tax Act, 1961. The Tribunal found the reassessment proceedings to be based on a change of opinion without tangible material, leading to a reversal of the CIT(A) order in favor of the Assessee. Additionally, the Tribunal determined that the disallowance under section 14A was excessive and restricted the amount of disallowance after considering the arguments presented by the Assessee and the precedents cited.
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